Driven by digitalization, convergence within the telecommunication and media sector is not only a today's phenomena, but will even become more important in the future. One of the most important dimensions of convergence is vertical integration, i.e. the merging of formerly independent firms along the value chain. Analyzing the economic aspects of vertical integration in the media and telecommunication sector, it is argued in this paper that convergence is clearly positive for the merging firms themselves. However, from the consumer perspective, there are positive as well as negative effects which do not allow for an unambiguous conclusion about convergence. The expected decrease in market prices due to a vanishing double monopoly markup is in favor of the demand side. On the other side, a vertical integrated firm will probably be able to foreclosure the access to the consumers against upstream firms (e.g. content producers), thus reducing the variety of media content. In the long run, this negative effect on product differentiation may even be strengthened by building up strategic entry barriers.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Universitaet Augsburg, Institute for Economics in its series Discussion Paper Series with number
234.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Nicholas Economides, 1995.
"The Economics of Networks,"
Working Papers
94-24, New York University, Leonard N. Stern School of Business, Department of Economics, revised Sep 1995.
[Downloadable!]